Principles of Accounting 1 : Chapter 2

a trial balance is not a financial statement but a mechanism for checking ______ of debits and credits in the ledger.

equality

How are the accounts ordered in a trial balance?

follows identification number for the chart of accounts

Commas and Dollar signs don't appear in ledgers and ________. But they are present in financial statements.

journals

What are the steps to posting a journal entry?

(1)Identify debit account in ledger: enter date, journal page, amount and balance (2)Enter the debit account number from the ledger in the PR column of the journal. (3)Identify credit account in ledger: enter date, journal page, amount and balance. (4)Enter the credit account number from the Ledger in the PR column of the journal

Steps to preparing a trial balance?

(1)List each account title and its amount(from ledger) in the trial balance. If an account has a zero balance, list it with a zero in its normal balance column. (2)Compute the total of debit balances and the total of credit balances. (3)Verify total debit balances equal total credit balances.

What are three other names for income statement?

1. earnings statement 2. statement of operations 3. profit and loss statement (p&l)

What is the analyzing and recording process?

1.Analyze each transactions and event from source documents 2.Record relevant transactions and events in a journal. 3.Post journal information to ledger accounts 4.Prepare and analyze the trial balance

What is a T account?

A T-account is a simplified version of a ledger account. The left side of an account is called the debit side, often abbreviated Dr. The right side is called the credit side, abbreviated Cr.2

What time period does a balance sheet record?

A balance sheet reports on an organization's financial position at a point in time. The income statement, statement of retained earnings, and statement of cash flows report on financial performance over a period of time.

What is the normal balance for liabilities?

Credit

Your debits must equal your ________.

Credits

What is the normal balance for Dividends and Expenses?

Debit

What is a trial balance?

A list of general ledger accounts with their balances. A trial balance is used to check that the total value of all debit entries made during the period equals the total value of all credit entries made in the same period.

What is the difference between a journal and a ledger?

A journal entry is often referred to as the book of original entry. The ledger is referred to as the book of final entry because financial statements are prepared from it. Every transaction flows from a journal to one or more ledgers

What is the normal balance for assets?

Debit

What is a general ledger or ledger?

A record containing all accounts used by a company and their balances.

What is a statements heading?

A statements heading list the 3 W's, the Who - name of organization, What - name of statement, When - statement's point in time or period of time.

What is double entry accounting?

A system of accounting whereby two entries are made in the ledger accounts for each business transaction. One of these entries is known as a debit entry and the other as a credit entry. Double-entry accounting requires that for each transaction: 1. At least two accounts are involved, with at least one debit and one credit. 2. The total amount debited must equal the total amount credited. 3. The accounting equation must not be violated.

What is an account?

An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. Information from an account is analyzed, summarized, and presented in reports and financial statements.

What is an Asset Account?

Assets are resources owned or controlled by a company. Most accounting systems include separate accounts for the following assets described here: cash, accounts receivable, note receivable, prepaid accounts, supplies accounts, equipment accounts, building accounts and Land.

What is the normal balance for Common Stock and Revenue?

Credit

What is the difference between external transactions and internal transactions?

External transactions occur between the organization and an outside party. Internal transactions occur within an organization.

Which column of the T accounts are debits in?

Left

Which column of the T accounts are credits in?

Right

What is a source document?

Source documents identify and describe transactions and events entering the accounting process. They are the sources of accounting information and can be in either hard copy or electronic form.

What is a chart of accounts(COA)?

The chart of accounts is a list of all ledger accounts and includes an identification number assigned to each account.

What is the normal balance?

Whichever column increases are recorded in a T account.

Unlike on the balance sheet, for journal entries ________ don't have to equal liabtilites and equity. Just make sure each recorded transaction reflects _______ and ________.

assets, debits, credits

what is debt ratio and how do you calculate it?

describes the relationship between the amounts of the company's liabilities and assets. total liabilities/ total assets

What is a liability account?

liabilities are claims by creditors against assets, which means they are obligations to transfer assets or provide products or services to others. Creditors are individuals and organizations that have rights to receive payments from a company. Common Liability accounts include: accounts payable, notes payable, unearned revenue accounts and accrued liabilities.

what is an account balance?

the difference between total debits and total credits for an account.

What is an equity account?

the owner's claim on a company's assets is called equity, or stockholders' equity or shareholders' equity. Equity is the owners' residual interest in the assets of a business after deducting liabilities. Equity is impacted by four types of accounts: common stock, dividends, revenues, and expenses:

Accounts are arranged into _______ general categories.

three

What is a general journal?

used to record any transaction and includes the following information about each transaction. (a) date of transaction. (b) titles of affected accounts. © dollar amount of each debit and credit. (d) explanation of the transaction.